Take your business global
The days when only big corporations could do business internationally are over. How to turn your company into a multi-national one.
FSB -- When Devon Rifkin began scouring the globe for a low-cost but reliable producer of hangers for his fast-growing firm, The Great American Hanger Company, he began his search without stepping outside the comfort of his air-conditioned Miami office. A few clicks of the mouse on sourcing website Alibaba.com led him to Wooden Enterprises and Trading Cooperative, an India-based manufacturer specializing in wooden and metal products. After sending his company samples of a few basic hanger models, it responded promptly with mockups at attractive prices and quality. Wooden Enterprises and Trading Cooperative is now one of The Great American Hanger Co.'s regular suppliers.
Has your small business gone global yet? In an increasingly wired world, adding an international dimension - whether through importing, exporting, outsourcing, manufacturing overseas, or forming a strategic partnership - is now the province of both mom and pop ventures and large conglomerates. It is becoming almost as easy to do business in Peru as it is in Peoria. Result: The number of startups venturing overseas is skyrocketing. One recent study found that the number of multinational companies has swelled from 7,000 in 1975 to approximately 40,000 today. In addition, the net income of U.S. companies from operations outside the States now accounts for about half of income earned at home, compared to just 10 percent in 1950.
So how do you take the first step to expanding internationally? Here are some guidelines.
1. Choose an entrepreneur-friendly environment. Even if you travel frequently on business, you may not have a full picture of the day-to-day realities involved in running a fast-growth venture in a particular country. To expand your knowledge, check out The World Bank's website, which compares the regulatory environments of 175 economies, suggests Professor Sebastian Teunissen, who directs the Center for International Business and Policy at University of California at Berkeley's Haas School of Business. For more information, read our story, "Who in the world is entrepreneurial?" It looks at the countries that are the most and least friendly to small business.
2. Turn to Uncle Sam. For fees ranging from $500 to $800, your local U.S. Export Assistance Center (USAEC) - run by the Department of Commerce's International Trade Association - can help you with tasks such as finding pre-screened partners, agents and distributors; conducting background checks and market research; and tracking down relevant trade events in 85 countries.
3. Investigate suppliers thoroughly. Great American Hanger Company's Rifkin remains a fan of the sourcing site Alibaba.com because it enables him to search for suppliers by country and product (or service). But he avoids placing orders before he has traveled to meet potential new suppliers and tour their factories. "Although technology is terrific and can save a lot of time and money, there is nothing like putting and name with a face, and seeing the factory with your own eyes," Rifkin says. Make sure you also get the names of references you can call before you sign a deal.
4. Hit the trade show circuit. Because attending these events tends to be costly for exhibitors, participants tend to be well-established suppliers of goods and services and logistics experts, such as freight-forwarders and customs brokers. For leads on the most reputable shows, consult your industry association, as well as the websites of the U.S. Department of Commerce (for non-food related businesses) and the U.S. Foreign Agricultural Service, both of which have offices that focus on global trade events.
Don't expect to close sales or seal any deals at these shows. Unlike U.S. extravaganzas, which tend toward order-writing and deal-making, overseas events are more about establishing relationships over a cup of coffee, says Karl Brown, a veteran show attendee, whose company, SB Global Foods in Lansdale, Penn., exports to more than 43 countries. Patience and persistence pay off. Brown landed his two largest clients one year after making their acquaintance at an international trade show in Germany. "In both cases, the customers had been eyeing us for several years at the same trade show without actually initiating a dialogue," he says. "It was if they were measuring our commitment to export before they approached us."
5. Sharpen your diplomatic skills. As you don't need us to tell you, old- fashioned sensitivity and courtesy go a long way toward building productive business relationships. An entire industry has sprung up to help, with consultants offering expertise in specialties such as cross-cultural negotiation training and cultural intelligence. To start your learning for free, download the World Citizen's Guide, a collection of 25 practical tips put together by Business for Diplomatic Action, a non-profit dedicated to combating anti-Americanism worldwide.
For information tailored to a particular country or industry, consider enrolling in a course. Starting this fall, for example, the Thunderbird School of Global Management in Glendale, Ariz., in conjunction with Business for Diplomatic Action, will offer tailor-made courses on global corporate diplomacy, designed to help business executives develop effective global teams and best global practices. "These are intensive one-day workshops combining lectures, role-playing and group exercises and are appropriate for seasoned veterans as well as newcomers to global business," notes Cari Guittard, executive director of Business for Diplomatic Action.
6. Nail down the logistics. Once you are ready to do business overseas, you will need to secure help. If you will be exporting, you will need a freight-forwarder. If you will be importing, your supplier will handle this for you. Regardless, you will need a customs broker to handle paperwork. Often, freight-forwarders and customs brokers work in tandem. There are literally hundreds (if not thousands) of freight forwarders in the U.S.. A simple web search will yield the sites for almost all of them. Contact several and have them provide you with quotations on your freight costs and their handling fees, as these can vary dramatically, say seasoned entrepreneurs.
Depending upon the industry and the commodity being shipped, there may be specific forwarders that specialize in your type of cargo. Pick one with broad experience and good connections to container companies and multiple ports, suggests children¹s shoe designer Mia Abruzzese, whose Boston company, Morgan & Milo, manufacturers its shoes in China.
If there are patent and trademark issues to consider, network with others in your industry to find a lawyer with experience in this branch of international law. Choose a firm with overseas offices or, at a minimum, correspondent relationships with local lawyers or practices in foreign countries. "If you ever need to fight for your intellectual property overseas, it will be very difficult to do if your lawyer only has the resources to protect your interests from a U.S.-based office," cautions Brown of SB Global Foods.
7. Protect your relationships. Maintain consistent and frequent contact with your overseas partners via phone, e-mails and regular visits so you can be proactive about any problems that arise. After you have established some traction, it may make sense to hire a local agent who works on your behalf. Admittedly, this is tricky. Brown relies on industry contacts, referrals and trade shows to find candidates, and, after 14 years of selling in Europe, recently hired his first local sales/marketing manager. "This particular individual worked for one of our import partners and had first-hand experience selling our products," says Brown. "He speaks six languages and has a tremendous network of industry contacts across Europe. Based on this background and the overwhelmingly favorable exchange rate environment for U.S. exporters, we took the plunge and have been very excited thus far with the results." If your company grows quickly enough, finding a local representative may not be an issue for long. You may someday be able to open your own office overseas, staffed with employees who have global experience.click here.